Innovative HR ineffective in manufacturing firms

Attempts at innovative HR have actually driven up turnover in Canadian manufacturing operations, according to a new study from Statistics Canada.

The study examined how six specific alternative work practices — problem-solving teams, self-managed teams, flexible job design, profit sharing, merit pay and formal training on teamwork — affect turnover.

It’s been increasingly argued over the last decade that certain innovative HR practices can make jobs more interesting for employees, produce greater effort and reduce the number of employees who quit the job each year, said René Morrisette, an economist with Statistics Canada and co-author of the study, Alternative Work Practices and Quit Rates: Methodological Issues and Empirical Evidence For Canada.

But the data suggest some of those expectations may have been exaggerated, particularly in a manufacturing setting. In fact, the study suggests firms in manufacturing would be better off staying away from innovative HR.

“We didn’t find any evidence that innovative work practices were associated with lower quit rates in manufacturing,” said Morrisette.

According to the study, the quit rate in manufacturing firms without any alternative work practices was 10.7 per cent while at those operations with teamwork and formal teamwork training, the rate was 15.8 per cent (see chart).

In a plant where the work is standardized and routine, then maybe traditional work organization is best. “People prefer predictable tasks,” he said.

“It boils down to the fact that the incentives for adopting these practices might not always be there.”

Significant reductions in turnover are only realized in highly skilled or technically complex operations, he said. Even then, the effect is greatest when practices are bundled together in combination, but few firms are doing this.

The overall message is that the more complex and technical the organization, the more likely positive effects from innovative HR are found, he said.

The study is based on Statistics Canada’s groundbreaking 1999/2000 Workplace and Employee Survey, which polled more than 24,000 people from about 6,000 organizations. This data is giving Canadian researchers unparalleled insight into the organization and effectiveness of work in Canada.

According to the findings, high-skill service firms — telecommunications, finance or technical services, for example — that use none of the alternative work practices had a quit rate of 15.8 per cent, while those firms with teamwork and formal training on teamwork had a quit rate of just 6.1 per cent.

The study showed only a modest improvement at low-skill service firms, such as consumer services and retail. The standard quit rate at these firms is 19.3 per cent when none of the innovative HR programs are in place, but drops to 14.6 per cent when teamwork and training are introduced.

However, the study also found more conventional practices may be the key to reduced turnover in some settings.

Simple policies of sharing information about organization performance with employees appear to contribute to lower quit rates, said Morrisette.

This may simply be because information helps employees feel more comfortable about the future and make them more reluctant to quit. It may also be that organizations that share information with employees are more likely to use other HR practices that show employees that they care. For example, those organizations that regularly communicate with employees also may have more reasonable production expectations, said Morrisette.

And while the study is a powerful tool for researchers examining Canadian workplaces, the one thing that can’t be accounted for is those firms that adopt innovative HR may just be better managed in general, he said. It may not be the specific practices that are reducing quit rates but just the overall better quality of management in those firms.

“The relationship between work practices seems to be quite complex and different across sectors, and at the very least it might be hazardous to generalize such findings,” he said. Workplaces can’t assume that if they adopt one of these practices they can expect a reduction in the number of employees leaving the organization.

Aside from the relative ineffectiveness of alternative work practices in manufacturing settings, Morrisette said the other surprise finding from the research was that so few organizations are combining these practices. Most of the human resource management literature takes it as a given that these practices need to be combined to positively affect the workplace substantively. Only about six per cent of firms are using more than one practice.

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